Josh Brown, an investment professional and CNBC contributor, joins Joe Terranova and Jenny Harrington to delve into the final trading hours of 2024. They analyze the impressive surge in Communication Services and Tech stocks, discuss strategies for 2025 that emphasize diversification beyond tech, and share insights on the booming ETF market. Brown also offers his Trade School lessons, while the group reflects on Apple's challenges and potential shifts in the semiconductor space, providing a comprehensive look at the investment landscape as the year wraps up.
The stock market is set for a transition in 2025, with earnings growth of major tech firms expected to drive long-term performance beyond short-term corrections.
A significant shift towards ETFs highlights the financial industry's evolution, as investors increasingly prefer cost-effective and tax-efficient investment options over traditional mutual funds.
Deep dives
Market Trends and Year-End Reflections
The stock market is experiencing a slowdown as the year-end approaches, with the S&P 500 and NASDAQ showing declines. This marks a notable trend, as it is the first time since 1952 that the S&P has faced declines of over 1% in the final trading days of the year. The conversation emphasizes the importance of context for long-term investors, suggesting that while 2025 may not replicate the significant gains seen in previous years, it could lead to robust performances in subsequent years, much like the market events from 1953 onward. Investors are encouraged to remain composed, acknowledging the cyclical and sometimes unpredictable nature of stock market performance.
Focusing on Earnings Growth
The significance of focusing on earnings growth over short-term market fluctuations is highlighted, particularly in relation to major technology firms. The current earnings growth of the largest corporations is expected to fuel market performance well into 2025, overshadowing any short-lived market corrections. Historical data illustrates how industries can pivot from value to growth stocks based on earnings momentum, reinforcing the need for investors to track performance metrics rather than merely relying on stock classifications. As the earnings growth rate is projected to be significantly higher in sectors outside the 'Magnificent Seven', diversification into broader market areas is suggested for future investments.
The Shifting Landscape of ETFs
2024 has been a record year for exchange-traded funds (ETFs), surpassing $1 trillion in inflows for the first time, reflecting a major shift in the financial advice industry. This trend is steering investments away from traditional mutual funds as fiduciary financial relationships prioritize cost-effective, tax-efficient investment vehicles. The data points to a continuous outflow from actively managed funds due to their inability to outperform relevant benchmarks, which has resulted in a fresh wave of derivatives-based ETFs capturing investor interest. This ongoing evolution in trading methods illustrates a broader preference for ETFs over mutual funds, solidifying their status as the preferred tool for investors looking to navigate market uncertainties.
Opportunities in Real Estate and Fintech
Within the realm of real estate, retail properties are showing signs of resurgence as demand remains high, particularly for open-air shopping centers, benefiting from low vacancy rates and rising rents. The sector is anticipated to attract further investment as interest rate cuts and increasing consumer engagement bolster activity. Additionally, investor focus on the fintech industry, especially amidst upcoming IPOs from major players like Klarna and Stripe, presents a compelling opportunity for growth beyond traditional tech sectors. The combination of a burgeoning real estate market alongside the financial sector's evolution highlights diverse pathways for investment in 2025.
Frank Holland and the Investment Committee discuss the final trading hours of the year. Plus, Communication Services and Tech leading the charge again, up nearly 40 percent this year, the Committee reveal their 2025 strategies. And later, class is in session, Josh Brown shares his Trade School on ETFs in the new year.